European central bankers and regulators have voiced significant concerns that the rapid advancement of agentic artificial intelligence poses substantial risks to financial stability, warning that current regulatory frameworks are struggling to keep pace.
Bank of England deputy governor Sarah Breeden questioned the need for guardrails, such as market-wide circuit breakers or kill switches, to mitigate potential market meltdowns caused by faulty AI models. She noted that debt financing for AI is rising rapidly, increasing the financial stability consequences of any fall in AI-related asset prices.
European Central Bank President Christine Lagarde described AI technology as a "major risk," surpassing previous cybersecurity threats due to its accelerating pace and the yet-to-be-found means of defense. Similarly, Nikhil Rathi, CEO of the UK’s Financial Conduct Authority, stated that traditional rulemaking cycles are insufficient for AI technologies that evolve in weeks or months, advocating for new tools and a more collaborative approach with the market.
The Bank for International Settlements (BIS) cautioned that AI "exuberance" could lead to a "sharp pullback in [AI] asset prices after a prolonged period of exuberant risk-taking," potentially triggering "disruptive macro-financial feedback loops." Tobias Adrian, Director of the IMF’s Monetary and Capital Markets Department, also pointed to a potential maturity mismatch between physical AI assets and their debt duration.